Cracking The Code

Friday, April 27, 2018

Congratulations to the past and present DocuSign team for their incredible achievements, as the company makes its public market debut. What a journey it has been since the genesis of the company in 2003, when it’s visionary team set out to automate the agreement process and solve many pain points from speed to cost and accuracy.

In 15 years, DocuSign’s cloud-based platform has made it possible for more than 370,000 companies and hundreds of millions of users to make nearly every agreement, approval process, or transaction digital—from practically any device, virtually anywhere in the world. It’s rare to see any type of technology reach such a range of customers - from very large companies to individual users across all industries. Today, seven of the top 10 global technology companies, 18 of the top 20 global pharmaceutical companies, and 10 of the top 15 global financial services companies are DocuSign customers. More than 700 million transactions have been performed on the platform. And this is just the beginning!

DocuSign’s second office, the ‘Garage’

From printer & fax to computer
When Tom Gonser, Court Lorenzini and Eric Ranft started the company in 2003 out of Seattle in the overhang of the dot.com explosion, the business world was used to the print-sign-fax routine. I’m sure everyone still remembers those moments of anxiety in a random hotel lobby, trying to email a document to the reception desk so they could print it for signature… a frustrating process which could easily take an hour. There had to be a better way to do this and indeed there was: DocuSign was born and suddenly the print-sign-fax routine became as simple as connecting to a Wi-Fi network. One click and the document was securely signed and authenticated. But, you still needed a computer and a Wi-Fi connection to do this.

From computer to iPad
In the company’s early years, the notion of an e-signature first gained traction in the midmarket and in particular in the real estate industry. Real estate brokers quickly realised the value that could be gained from an expedited signature process. With the launch of 3G and the rapid growth of iPhones and iPads in 2007-09, the world realised that paper could be entirely digital, beginning a new era for DocuSign, which had invested early on in “mobilising” its product. Executing a transaction became as simple as a tap on your tablet or smartphone, further fuelling the company’s growth.

From e-signature to digital transactions
With large enterprises beginning to adopt the technology, the platform quickly evolved in several dimensions. With the first global enterprise-wide deployments, the team strengthened the scalability, security and certifications of the platform. A lot of people still see e-signature as a simple problem to solve (as easy as a tap on a mobile screen), but this is only the tip of the iceberg. There is a lot more to it to ensure the authentication of the user, the security of the information, and the management of the transaction workflow.

Partners network
Keith Krach, who joined the board of the company in January 2010, was appointed CEO the following year. During his tenure from 2011 to 2017, Keith developed a set of partnerships with most of the relevant leaders involved in software productivity and transactions, including Microsoft, SAP, Salesforce and Comcast. These deals strengthened the footprint of DocuSign, reinforcing the company’s position in the industry.

A DocuSign sales meeting in early 2016

It is all about people
Having the chance to work with the leaders who made this success story happen has been a privilege for us. This stellar team includes Tom Gonser, the co-founder of the company and driving force behind the product and vision; Keith Krach, who I had the chance to know before his involvement with DocuSign; Mike Dinsdale, who I knew from his days at Lithium in 2009, and who became CFO of DocuSign in 2010 (and is now the CFO of Gusto). Mike and I regularly exchanged thoughts on SaaS metrics and strategic transactions in EMEA. And last but not least, Dan Springer, a long-time friend of Accel through our investment in Responsys, who became CEO last year.

What a journey – hearing the bell ring this morning brought all of these wonderful memories back. It reminded me that at the end of the day, the journey is the reward. Thank you again to all the members of the DocuSign family!

Tuesday, December 12, 2017

Earlier this fall, we co-organised with Salesforce
Ventures the first edition of Cloud
Europe, a ½ day event preceding SaaStock 2017 and gathering the founders of
the top 100 European SaaS companies. We were lucky to have as a keynote Chris
Ciauri, EVP Salesforce EMEA, and he shared a few tips to check that your sales
organisation is ready to scale. Here is a quick summary of the key insights
with us, which hopefully will help you with your 2018 planning.

1)Balance your sales management
ratios

As software companies scale, the question
of span of control in the organisation becomes critical. There is no right or
wrong answer and it will depends on your business. But here is what has worked
well for Salesforce and is a good starting point for a SaaS business:

·4-5 first line managers to 1
second line manager

·6-10 reps per first line
manager. 6-10 reps is a wide range: the right ratio will depend on the segment.
For small businesses, the number will be closer to 10 and for enterprise, closer
to 6

2)Figure the right formula
for your sales support functions

For most SaaS companies, sales reps will be
supported typically by Solutions Engineers (SEs) and by Business Development
Reps (BDRs) who are cold calling and taking appointments. To be able to scale
quickly, each company should figure out the right ratios of these support
functions vs. sales reps. The formula will be heavily dependent of the customer
segment targeted. Here is the rule of thumb that Salesforce has used
successfully:

3)Build your Sales Academy

Sales and acquisition costs are typically
heavily represented on the cost base of SaaS companies and having a short
ramp-up time for your new sales hires is a key lever to increase the overall
productivity of your organisation. Here are the four key pillars that
Salesforce has used to set-up an effective Sales Academy:

·Send your new hires pre-work: You want
your new hires to have a basic understanding of your product functions and
differentiation. Send the sales pitch, product sheets and competitive overview
to new hires in advance. It is a good step to get them started on the right
foot.

·Develop your sales bootcamp: Stack your
hiring to make sure a critical mass of new sales people will start on a given
Monday and prepare a bootcamp over several days to get them familiar with the
company product and teams. It is helpful for example to have them attend
support calls, get an overview of the product roapmap from the product team,
shadow experienced reps and, of course, learn the tips from the top people on
the team.

·Prepare a 30-60-90 day
achievement plan: The first three months are critical to ramp your reps and it
helps to have specific goals each month to measure progress. It also gives them
something to aim for, especially in businesses where the first customer close
can take time.

·Don’t forget the badges: as
your reps will progress in their tenure, it is effective to attribute badges
based on specific achievements. It helps boost morale and competitiveness in
the team, when all reps cannot be in the President’s club

At the end of
his presentation, Chris gave us a final piece of advice: each month counts!
Manage your sales and pipeline on a monthly basis (or try to!), even if you
have quarterly closings. Fast cadence is everything in sales!

Tuesday, September 19, 2017

Recent SaaS trends and the Accel Euroscape of the 100 most promising companies in Europe and Israel

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This article was co-authored with my colleague Pia d'Iribarne and published initially on Tech.eu. Findings were presented at Cloud Europe, an Accel and Salesforce event gathering the top 100 SaaS companies in Europe, in conjunction with SaaStock 2017. You can see the full presentation here -

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Europe is fertile ground for Software-as-a-Service (SaaS) companies, as shown in our comprehensive look at SaaS last year, “SaaS Wars – Europe Awakens”. Since then, momentum has only accelerated, and we’ve published a fresh edition of the top 100 European SaaS companies in conjunction with SaaStock 2017.

But, first, let’s take a look at the overall health of the SaaS industry.

12 cloud IPOs in the past 2 years: One from Europe

SaaS companies are thriving in the public markets, with their aggregated market cap grew 350% since 2011, and 12 cloud companies going public in the past 24 months. These 12 have performed well, with an aggregate $2.6 billion in revenues (growing 39% year-on-year) and $25B of market cap. Compared to Salesforce, the industry leader, the stats were not too dissimilar over the same period: its market cap grew by $19B and its revenue increased by $3.3B.

Looking closer at the 12 companies, we can conclude that it takes a $100m+ revenue run rate and 30-50% growth to go public in the current environment, even if several companies like Atlassian and Cloudera waited to reach $300M+ revenues before going public. However, the companies’ annualised free cash flow showed a big variation, ranging from -$100M for Box and Cloudera to +$100M for Atlasssian.

Out of the 12 IPOs, Mimecast is the only company from Europe. However, as Europe’s SaaS acceleration began in 2013, and given that the median time to IPO from this group is 10 years, it will take time before we see a meaningful geographical change in SaaS IPOs.

A healthy funding environment and momentum in Europe

Like the public market, the private funding environment is still at an all-time high in 2017 with an annualised investment rate of $8.4B in the US, $2.6B in Europe and $0.9B in India. Europe and India are growing particularly quickly, and investment more than doubled from 2015, while the US is up 20%.

The pace of SaaS company creation in Europe is growing even faster, up from 200 companies in 2008-10 to 670 in 2014-16. Our investments in the space have followed suit. We’ve invested $2.3B in SaaS companies globally. In 2010, 4% of this funding was going to European SaaS companies, while it’s over 40% this year.

With a more mature SaaS market and more late stage companies, the US is posting record late stage funding rounds with Dropbox raising $600M, Slack $200M and Qualtrics $180M in the past 18 months. Funding in Europe is healthy but reflects the market’s earlier stage. The largest rounds include Algolia with $53M, Collibra and Showpad with $50M each and CallSign with $35M.

The Accel Euroscape

With a positive environment fuelling the market, this year we extended our research for the Accel Euroscape, the 100 most promising SaaS companies, to look at over 1,000 companies across 12 countries and included a new category, Security:

Note: to create the list, we ranked each company by a set of criteria including market attractiveness, level of technology differentiation, strength of the team and initial traction (monthly recurring revenues and growth in number of employees). Nothing is perfect, and we might have missed some great companies. Your feedback is welcome!

Overall, these 100 companies illustrate how the European market is maturing. They have raised $3.4B in total, of which $1.8B or 53% was in the last two years alone. Close to 60% of them have raised more than $15M, and 22% have raised more than $50M, including Algolia, Collibra, Doctolib, Qubit and Showpad. From a revenue standpoint, 58 companies have already crossed the $5M per year mark and 29 are $15M+.

From a geographic standpoint, the UK and Israel lead the pack with 20 companies each, followed by France with 18 and Germany with 8. The remaining companies are fragmented across Europe, showing that great SaaS companies can emerge from any city on the continent. From a funding perspective, Israeli companies have raised on average more than their British (-48%) and French (-160%) counterparts at similar stages.

Comparing the list to the top 300 leading SaaS companies in the US, some interesting trends emerge:

Europe is showing strength in data/ analytics and security, driven by the booming ecosystem in Israel but is less represented in developer/infrastructure and vertical applications.

The EU/US funding gap still exists, especially at the seed stage ($1-2M raised on average in Europe vs. $5M in the US) and series B ($20M raised on average in Europe vs. $37M in the US).

In terms of funding efficiency, leading European companies appear to be more efficient than their US counterparts. We looked at capital required to reach $10M Annual Recurring Revenue and saw that European companies required $7-15M to get there while US companies required $15-20m.

In addition, fast-growing US and European companies are reaching $10M in revenue in similar time periods. Whether Algolia or Twilio and Duetto or Doctolib, they took 1-2 years.

EU Companies: Blue Lines - US Companies: Black Lines

Crystal ball: What the future holds

With the European SaaS landscape moving fast, we’ll continue to see it evolve and believe there are five trends that will define the next crop of fast growing SaaS businesses:

AI and Automation-driven productivity: The next generation of AI-driven technologies to improve backend processes is now coming of age, and is seeing fast adoption from Fortune 500 companies redesigning their processes. Large System Integrators are developing dedicated practices to drive this change. Promising companies in this segment include Robotic Process Automation vendor UI Path and process mining software startup Celonis.

The rise of the SMB engine: The past few years have demonstrated that companies focusing on the SMB segment can become very valuable businesses – both as public companies, with Shopify reaching $10B market cap and Xero, Wix and Hubspot in the $2-3B range, or through M&A, with Netsuite acquired for $9.3B, Constant Contact for $1.1B and Intacct for $0.85B.

APIs and Microservices-driven infrastructure: Given the increasing need for agility and scalability, micro-services and APIs are taking over infrastructure, and we can expect more companies to emerge in this area, providing API-driven functionality (like hosted search engine API Algolia) or helping to manage this next generation of infrastructure (like Application Performance Management solution Instana).

Vertical applications: With the SaaS market in Europe maturing, we expect to see this category develop, and a new generation of services driven by mobile and AI to emerge, such as Shift Technology in insurance, Doctolib in health, Mambo in finance and Mirakl in retail.

Compliance and security: With cyber threats on the rise, the need for security and compliance platforms has never been so acute. One of the challenges businesses face is how to enforce security without complicating the ease of use to the point that it becomes a hindrance to productivity. One pioneer is CallSign, which has developed an adaptive authentication platform, getting rid of passwords.

Sunday, April 09, 2017

Nominations are now open for the 2017 edition of Accel SaaS 100 Europe, the list of the top 100 leading SaaS companies emerging from Europe & Israel.

Last year, after many months of research, we published alongside our Article “SaaS Wars: Europe awakens” the first list of 100 leading SaaS companies from Europe & Israel, in conjunction with SaaStock 2016, the first large scale SaaS event taking place in Europe. In front of the enthusiasm raised by the post and the conference, we have decided to renew the initiative this year and update our Top 100 for 2017. We will even go further and invite the founders of the Top 100 companies to a unique half-day event organised by Accel in partnership with SaaStock 2017, on Monday September 18th, right before the start of the conference.

This past year’s winners have raised a combined $2.5 billion to redefine industries on a global scale. They include Trustpilot, Intercom, Doctolib, Showpad, Zerto, Algolia, Qubit and Typeform among others. To compile last year’s list, we screened more than 1,000 companies across 12 countries in Europe, met hundreds of them, and spoke with dozens of entrepreneurs & investors from the SaaS ecosystem. Nobody is perfect - we know we might have missed some amazing companies, so this year we are opening up the entry.

Do you think you are ready to join the ranks of Europe & Israel’s most promising SaaS Leaders? If so, it is easy to apply, just fill the official nomination form here. Feel free to also refer any other company you think should be on this list. After you submit your nomination, use the hashtag #AccelSaaS100 and tell the world why we should pay close attention to your nominee.

The nomination submission deadline is June 15th 2017 and we will announce the final list on September 18th.

Stay tuned as we release more information and we look forward to hosting the companies shaping the future of SaaS in Dublin in September!

Thursday, October 20, 2016

As an investor, I’ve sat on both
sides of the table in more than a dozen acqui-hire situations. Companies that successfullyleverage acqui-hires can save years of work and gain a competitive
advantage by adding skilled technical and operational talent, deep local market
knowledge and an accelerated time-to-market.

However, not all acqui-hires are
created equal, but there are numerous pre-deal considerations to ensure post-deal
success. Here are eight tips I’ve learned from the trenches.

Acqui-hire Tip 1: One Vision, Same Values

Both the acquiring and acquired
teams need to share the same vision and values. The two teams must work closely
and effectively together in order to be successful. “What matters most is the personal and professional fit between the two
teams. They should ideally share the same goals, business and company cultures.”
(Olivier Bremer, founder of PostoInAuto – acquired by Blablacar)

Acqui-hire Tip 2: Crystal-Clear Roles

Define clear roles at the outset
to avoid any misunderstanding or redundancy. This starts by deeply
understanding the attributes and behaviors of the other company. Micro-managing
a highly entrepreneurial and innovative team, for example, can cause animosity
and frustration. Be certain that both parties understand how the acquired
executives and employees will fill key roles within the larger organization. Acqui-hires
work well when the acquired team continues to run the business or business
functions with relative autonomy. “Being
clear about the future roles of an acqui-hired team is key to post acqui-hire
integration.” (Piotr Jas, founder of
a Polish ride sharing company acquired by BlaBlaCar)

Acqui-hire Tip 3: One Big, One Small

Size matters. The larger the size
differential between the two companies, the easier the acqui-hire will be. It’s
more difficult when companies are of relative equal size, and the main variant
is one company’s cash on-hand. The smaller the size difference, the more conflicts
emerge around products, leadership, best practices, etc.

Acqui-hire Tip 4: Equity is King

You must agree to an incentive
structure that motivates the founders and key executives within the company you
acquire. This is paramount to make sure they remain invested in the success of
the company at large. An acqui-hire is
not a cash-out event. Use equity and options to incentivize and reward these
new team members. Determine the amount relative to the value of the businesses
– prioritize options over equity as motivation to stay.

Acqui-hire Tip 5: Global Incentives

The right approach is to allocate
options and shares of the global company rather than the subsidiary where the
acqui-hired team operated. Here’s what it is important to align incentives on
the overall success of the company:

Growth within
a country is linked to the amount invested in the region, which the acqui-hired
team does not control and may change over time.

Team roles will
evolve, including those from the acqui-hire. You will have to renegotiate incentives
if and when roles evolve in tandem with the company’s growth.

Finally, it
is hard to define the relative value of a specific country vs. the overall
company. When an exit comes, determining the respective value of each part has
a high chance of creating conflict at a time when all the team needs to work
closely together to make the exit happen

Acqui-hire Tip 6: Avoid Hidden Liabilities

Understand tax liabilities. There
are two common acquisition structures: option-A) asset purchase: the preferable
option where the acquiring company buys only the assets; option-B) company
purchase: acquiring company buys both the assets and liabilities. Option-A is
usually faster and safer, as you will not take on any hidden liability, which
may arise in the future. However, it can trigger tax liabilities for the
founders/investors of the acquired company. If you must take option-B, conduct
thorough legal due diligence to avoid future liability surprises.

Acqui-hire Tip 7: Keep it Simple

Acquiring a company with a
complex equity structure (i.e. many angel investors) can lead to a large administrative
burden that slows decision-making. Offer angels cash or options, which can be
only exercised at expiration (typically 10 years) or an exit. This way they benefit
from the full economic value, but are not shareholders. If this is not
possible, you can group them into a Special Purchase Vehicle (SPV) with only one
signatory.

Acqui-hire Tip 8: One Brand to Rule Them All

A global brand offers significant
synergies, so make sure acqui-hires rebrand quickly. BlaBlaCar rebranded all local
brands into one unified international brand, including their initial market,
France: “A single brand offers clarity and consistency for customers and
employees. The parent brand should have a brand on-boarding process to
streamline the transition, while creating a strong, unified and identifiable
global brand experience.” (Frederic Mazzella, founder of Blablacar)

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Account for these factors, but understand that
every company and situation is different. The founders and executives from both
parties must be diligent and transparent, and leave nothing to question. I hope
these learnings will influence your thinking in your quest to go global, and as
always, share your thoughts, feedback and questions with me here or on Twitter
(@pbotteri).

Tuesday, September 20, 2016

Accel Euroscape: The 100 most promising Software-as-a- Service companies in Europe and Israel

-This article was co-authored with my colleague Pia d'Iribarne and published initially on Tech.eu. Findings were presented at SaaStock 2016 and you can see the slides here-

Software is eating the world, and Software-as-a-Service (SaaS) is eating software. Global SaaS revenues are expected to grow by $19 billion in 2016, an increase of 22% from 2015, while traditional software revenues are shrinking by $10B. Two dollars in SaaS revenues are created for every $1 of software revenues eaten – an impressive stat, but where does Europe stand on the global SaaS map?

Rising tide

When I was in Silicon Valley, I spent most of my time investing in SaaS companies. When I moved back to Europe in 2011, I had to reduce my activity significantly in this area, as there was not enough going on. Five years later, the picture has changed drastically: five of Accel’s 10 most recent investments in Europe have been SaaS companies. SaaS in Europe is exploding in terms of both quantity and quality. Our analysis estimates that the number of SaaS companies created has grown 4x between 2007-09 and 2013-15, and the amount raised by European SaaS companies has more than doubled.

As it takes around 10 years for a SaaS company to reach maturity, the explosion we are seeing at the early stage has not yet translated into a significant number of exits. To date, there have been only four major European SaaS exits (all IPOs), including QlikTech in 2010, Wix in 2013, Zendesk in 2014 and Mimecast in 2015. The combined market cap of these companies today is around $9B. By comparison, the US has seen around 60 SaaS IPOs with a combined market cap of close to $140B ($50B of this is Salesforce).

The Accel EuroScape

To better understand the new generation of SaaS companies, we took a systematic look at more than 1,000 SaaS startups across 12 countries to create the “Accel EuroScape” – a list of the top 100 most promising SaaS companies in Europe and Israel:

Note: to create the list, we ranked each company by a set of criteria including market attractiveness, level of technology differentiation, strength of the team and initial traction (monthly recurring revenues and growth in number of employees). Nothing is perfect, and we might have missed some great companies, so please send us any additional companies to saas@accel.com

These 100 companies have raised a combined $2.5B and 85% of the $900M that went into European SaaS companies in 2015 alone. Twenty-eight of them have raised more than $30 million in total, while Trustpilot, Intercom, NewVoiceMedia and Zerto have raised above $100M. This concentration of capital in a limited number of champions will hopefully pave the way for a good number of IPOs in the coming years.

From a geographic standpoint, the top three regions for SaaS companies are the UK, France and Israel, with around 20 logos each in our top 100. Perhaps surprisingly, despite all the hype, Germany only has eight companies on the list. Across the rest of Europe, SaaS is still very fragmented, but every single country, big or small, has the potential to generate a champion. Take Denmark, where the passion of Peter Holten Mühlmann has made Trustpilot the online standard for customer experiences.

When these 100 companies are compared to a similar list of 300 US SaaS companies, a few trends emerge:

Marketing is the leading SaaS industry in Europe – 22% of the companies vs. 13% in the US. It’s interesting to see Europe overweight in this area, and the reason may be that several marketing start-ups in various European countries are going after the same problem – A/B testing is a good example. This creates small country leaders rather than global businesses and leads to a very fragmented market.

Europe is underrepresented in vertical SaaS solutions – 17% of the companies vs. 23% in the US. Vertical solutions are typically a sign of a more mature ecosystem. In Europe, a range of vertical SaaS companies is beginning to emerge, and it's likely to catch-up in the future.

From a funding standpoint, European SaaS companies have raised on average 30-40% less capital than their US counterpart at a comparable stage. Even with the difference in cost base (engineers in Europe are cheaper than in the Valley), the funding gap has not been closed yet, and European companies have less firepower than their US counterparts on average. That said, with 28% having raised more than $30M and a handful more than $100M, the funding they have received is enough to help them reach significant scale.

Building European Champions

Taking a step back from the categories on this map, two main types of European and Israeli SaaS champions emerge.

The first is the B2B global platform play, such as Algolia, the search-as-a-service API Nicolas Dessaigne and Julien Lemoine have built out of Paris. Like other technology infrastructure businesses, search is a truly global opportunity, and these companies need to bring their fight to the US early, as its size makes it the most strategic market. For example, half of Algolia’s initial customers where from the US. While breaking into the US can be a challenge, Europe has the engineering talent to build world-class companies. Take Intercom as an example; the combined design and technology skills of Des Traynor and Ciaran Lee have allowed it to shine in the very competitive field of customer communication.

The second type of company is the local SaaS champion with a solution connecting businesses to consumers. The consumer marketplace creates a winner-takes-all dynamic, which opens the door to grabbing massive market share. For example, two software companies are emerging in Europe for doctor booking management, Doctolib and DocPlanner.

Crystal balling

Looking back at the growth of SaaS ecosystem in Europe over the past five years, I am very excited about what will happen in the next five. A number of companies in our EuroScape have the breakout potential to be tomorrow’s global leaders and put Europe firmly on the Global SaaS map.

But, the story does not stop there. If SaaS is eating software, Artificial Intelligence is starting to eat SaaS. It’s early days, but legacy SaaS applications will be disrupted by a new generation integrating Artificial Intelligence and machine learning technologies. A good example is Shift Technology, which is applying AI to fraud detection in insurance. Founder Jeremy Jawish gave me a striking example of the power of its AI engine: would you think that someone filing a claim for a car accident the day after subscribing to a policy is a fraudster? In most cases this would be true, but not if the driver just got their license. No insurance claim investigator could figure this out, but Shift’s AI engine did.

Tuesday, July 05, 2016

Most
startups fail at getting a new country off the ground. This is why Unicorns are
such a rare breed. Fortunately, a happy few have succeeded at finding this
magic formula, like the team at Blablacar and turned it into a competitive
weapon. One of their secret: acqui- hiring.

This is my
second post on international expansion. If you wonder how to pick your next
launch country first, see my earlier post here.

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One of the
most important decisions any company of any size will make is how it will
successfully launch operations in a new country (the following applies to
launching in new cities or states within an existing country). For early stage
companies, the stakes are even higher, and finding a great country manager is
the single most important element of a successful launch.

The most
common solution is not necessarily the easiest, where companies hire a manager
with expertise or a network in the chosen country, and enable him or her to
hire a team of two or three people as support to get started. However, an
experienced leader is extremely difficult to find and the risk of failure is
high. Alternatively, companies will “spin-off” an existing core team member to
lead the launch. While this is a good option, it can be difficult to implement
because this person must meet important criteria like language fluency,
geographic familiarity and more.

Fortunately,
there is another, proven strategy, which I will expand on here – the
acqui-hire.

Lessons from
Acqui-Hire Success Stories

The best
example of launching and expanding in new countries via acqui-hire can be found
in Paris-based BlaBlaCar, Europe's top ride-sharing company with 16 offices
worldwide. As, I was about to lead Accel’s first investment in the company, I
began building a list of all the start-ups operating in a similar or adjacent
space. Among them was a small company of two people in Italy called PostoInAuto
(at the time, BlaBlaCar had only launched in France and Spain). PostoInAuto’s
founder, Olivier Bremer, was terribly talented, but his business was not at a
point where he could raise a significant investment.

As our
investment in Bablacar was ready to close, I again reached out to Olivier to
gauge his interest in joining the BlaBlaCar team – strong leadership,
significant funding and the opportunity to retain total freedom to build the
service in Italy. He was intrigued, so I connected him to BlaBlaCar’s founders
who convinced him to join the adventure shortly after. Within four months,
Olivier re-launched his service under the BlaBlaCar brand in Italy, and today
BlaBlaCar is the dominant service in the country. Olivier went on to lead the
company’s launch in Germany given his dual German/Italian background, and
currently leads the business in both countries.

"There
were many reasons why I decided to join forces with BlaBlaCar: we shared the
same long term goals; I could feel a very good fit with the founding team; my
company was early stage and by joining BlaBlaCar” said Olivier Bremer,
BlaBlaCar GM Germany and Italy. “I was empowered to continue doing what I had
been doing, but with a much larger budget and support from a team that shared
my same passion.“

Learning
from the success of this initiative, I introduced the BlaBlaCar team to
companies in Poland and Russia, which have also been very successful
acqui-hires.

Making an
acqui-hire successful

If
successfully executed, combining resources from an acqui-hire will save years
of work while broadening the technical and talent bench. But, this is a highly
emotional process for the acqui-hired team. Therefore, it is very important to
set the right rationale and motivation to ease the process.

“Like any
successful partnership, the acqui-hiring and -hired companies must fully align
in terms of strategic goals, operational processes and culture. Both sides must
trust the other and commit to a shared vision,” said Piotr Jas, BlaBlaCar GM
CEE. “Both companies need to actively learn from one another throughout the
diligence process, and maintain an open and honest line of communication in the
early days of the expansion.”

Like any
relationship, the responsibility for success is shared. The acquiring company
must find a team with the skills and passion to accelerate growth
exponentially.

“Being
acqui-hired can be seen as a ‘fundraising++’ because the local team receives
money to expand faster (like any fundraising) and a robust and proven product and
tech platform. It also receives access to ultra-relevant experience in their
field, fast-growth methods, tailored customer support – provided by HQ in our
case –, a strong international brand with related communication methods and
positioning,” said Frederic Mazzella, BlaBlaCar co-founder. “Thus it is not
only about the money.”

Since its
acqui-hire of PostoInAuto, BlaBlaCar developed a team that scouts potential
acqui-hire opportunities across the globe. While it’s not possible to find
strong acquisitions opportunities in every country (the launches in India and
Turkey have been organic), it remains a key element of its fast global rollout.

The
interesting element of the acqui-hire strategy is that it does not require a
lot of upfront cash to implement relative to the resulting growth (assuming
proper diligence ahead of time).

“We acquired
three companies in short amount of time and each time I re-used the same term
sheet template. Most of the consideration for these deals was equity and
options, so cash is not a requirement. To be successful, you need to have the
right skills and having someone in the core team with M&A or venture
background helps a lot,” said Nicolas Brusson, BlaBlaCar co-founder.

**************

Today, more
than 50% of BlaBlaCar new members are coming from acqui-hires – an impressive
ratio proving the effectiveness of the approach.

While this
is one example of many across our portfolio and beyond, the acqui-hire strategy
remains consistent and taps into a set of best practices, regardless of
country: find great talent, maintain great culture and clearly communicate
strong values across each local teams.

Friday, May 20, 2016

“Should the United Kingdom remain a member of the European Union or leave the European Union?”

I hope the answer will be "Stay" - currently the betting odds are 1:5 for "Stay" and 10:3 for "Out", so the odds are clearly in the "Stay" camp. But who knows? The interesting part about this vote is that voters will not have a clear picture of what a Brexit actually means, since the post-Brexit UK/EU relationship will have to be negotiated after the referendum. If the "Out" vote succeeds, it will trigger a 2-year notice period during which the negotiations will take place. I worked with my colleague James Cameron to look at the potential outcomes and in particular how it would impact start-ups in the UK and Europe and we put together this short post.Three key areas will be on the negotiation table:

Trade terms and the extent to which the UK can still access the EU single market

UK control over EU immigration

How EU regulations will continue to impact the UK

All are interrelated and there will be trade-offs between all three.

The likely options

Neither the major parties nor the "Out" campaign have released proposals for the UK’s future after a Brexit –so we can only speculate based on other models that currently exist:

Option 1:

The Norwegian model

Option 2:

The Swiss
model

Option 3:

The Turkish
model

Option 4:

WTO rules

Out
of EU, but still in EEA (e.g. like Norway, Iceland). Preserves access to the EU single market for most
trading sectors, but most EU-derived laws remain in place. Free movement still applies.

Out of EEA, but the UK would negotiate access to the
single market, sector by sector.
Example - Switzerland has 129 different bilateral trade accords with
the EU, but must accept free movement of people and still pays fees to the
EU.

Outside EEA, but with a
negotiated customs union. In Turkey’s case, it doesn’t pay fees to
the EU and there is no freedom of movement.

Simply rely on WTO rules for access to the EU
market.

The situation would be very similar to what we have
now, but the UK would have reduced power to influence the rules that would
apply domestically. This solution may
appease ‘Out’ voters’ desire for more sovereignty - but is arguably an
unattractive result for both sides.

This model could
give UK more latitude to negotiate preferred deals in certain areas. However,
the EU think the current situation with Switzerland is unsustainable, and many
commentators think it’s unlikely they will accept a similar deal for the UK.

The Turkish
customs union covers only goods, not services or finance, so a similar deal
for the UK would deny the UK access to a big part of the single market.

This is a fallback
option would give the UK more sovereignty at the price of less trade and a potentially
big fall in income.

A Fifth option?

A fifth option that is advocated by ‘Out’ proponents is to negotiate a special deal for Britain alone that retains full access to the single market without observing all the EU’s rules (including freedom of movement) or contributing heavily to its budget (i.e. a form of ‘EEA lite’).

Whether the UK will be able to negotiate such a deal comes down to the relative bargaining power of the two parties. The Leave camp believes that UK will be in strong position since it is the 5th biggest economy in the world. However, the Remain camp notes that it is the relative size of the market that matters most - the EU is half of Britain’s export market, whereas Britain would be only 10% of the EU’s.

Ultimately, in a post-Brexit with a potentially hostile EU, we can expect that it will be extremely hard to secure as favourable a trading relationship as the UK enjoys at present, especially if it insists on curbing free movement of people.

Possible impacts on the UK tech ecosystem

Skilled labour migration: This is probably the biggest single concern for the UK tech scene. Restricting free movement will need to be negotiated if the UK wants to keep favourable trading terms post Brexit, but given immigration control is central to the Out campaign, we should expect the UK to push for at least some restrictions on free movement. Many in the Out campaign want to design a system that will favour immigration from skilled migrants regardless of origin (the ‘Australian model’). This may be workable in the longer term, but at least in the short-to-medium term we should expect a Brexit to trigger a sharp drop in the number of available skilled immigrants from the EU, which would be highly detrimental to the UK tech ecosystem.

Existing immigrants: Any EU nationals that are already in the UK pursuant to the existing arrangements should be unaffected. Under the Vienna Convention on the Law of Treaties they cannot be removed from the UK unless the countries agree otherwise – which is unlikely.

Financial services: Unless UK remains in the EEA (i.e. the Norwegian option), the European passporting rules for financial services will no longer apply to UK firms after Brexit. This will impact any UK companies operating regulated financial services in Europe or vice-versa.

EU R&D funding: UK is the second largest recipient of EU research and innovation funding (expecting £2bn in the next 2 years – roughly 20% of the total science budget allocated by the UK gov). Most has gone to university R&D programmes, but at least 15% typically goes to startups/SMEs. This funding will likely no longer be available after a Brexit.

Data privacy: On a Brexit, the EC must decide whether to designate the UK as a 'safe third country' for data. If it didn’t, personal data transfers to the UK could be restricted – similar to the US.

No Digital Single Market: A Brexit will most likely mean that the UK firms are excluded from the proposed digital single market – a basket of regulations that expect to be implemented between now and 2018 to streamline EU copyright applications, streamline VAT payments for digital goods, harmonise ecommerce rules and abolish EU roaming charges, amongst other things.

Currency impact: The pound will almost certainly continue to suffer a sharp sell off in the wake of a Brexit vote – which will benefit any UK based startups that sell globally, at least in the short term.

Possible impact on the broader economy

Base case

Upside case

Downside case

Similar to Norway or Switzerland - the UK maintains
deep and wide trade relations with the EU after leaving the bloc, but
continues with many of the laws and regulations that are currently part of EU
law (inc. free movement).

UK negotiates more favourable trade terms with the
EU and is able to quickly put in place favourable terms with other key countries. At the same time, the UK gets more control
over immigration and finds an immigration solution that does not restrict
flow of skilled labour.

Drawn out negotiations, with UK eventually trading controls
over immigration for much weaker access to the single market. At the same time, UK finds it difficult to
sign beneficial trade deals with other countries.

The impact on
the broader economy over the long term may be neutral, but we will likely
still see a period of volatility and low investment with the risk of a run on
the pound. Sovereignty will be
re-established, but in practice UK will be subject to regulation without
representation.

Most
commentators discount the likelihood of this scenario heavily – it will be
very difficult to secure as beneficial trading relationship outside the EU as
it enjoys at present, especially if it insists on curbing free movement of
people.

Britain
receives less inward foreign direct investment, fewer skilled immigrants, and
does not improve the regulation of the economy. The tech ecosystem is disproportionately
impacted by the reduction in skilled immigration.

Broadly
neutral (between -0.8% and +0.6% of GDP by 2030 according to OpenEurope)

In one of the most comprehensive polls of experts done so far (an FT poll of >100 economists in Jan 2016), >75% thought Brexit would adversely affect the UK’s medium-term economic prospects, only 8% thought Britain’s economy would benefit.

“There are few issues that unite UK economists but Brexit is one of them: they overwhelmingly believe leaving the is bad for the country’s economic prospects.” Financial Times

Tuesday, January 19, 2016

I was recently interviewed by the team of eFounders, the new Parisian SaaS start-up incubator founded by Thibaud Elzière (Fotolia) and Quentin Nickmans. They are running a series of interviews of European VCs investing in SaaS and I was lucky to be the first one.

I began my career at McKinsey and when the Internet bubble burst in 2001, I made a shift towards online software (ASP at the time). From then on, I remained convinced that SaaS was a much more efficient model, for both ISVs and customers — although many people remained skeptical on the viability of the model for a long time. Even in 2006, when I joined Bessemer Venture Partners, there was still a lot of skepticism in the Silicon Valley around SaaS (one of my first blog post in 2006 was titled: “Why I disagree with Tony Zingale — CEO of Mercury Interactive — on the future of SaaS"). My SaaS focus at Accel Partners is the natural continuity of this path. Today is a very interesting time for the SaaS industry: Europe has shown it was capable of creating successful SaaS businesses, and it’s only the beginning.

What makes a good VC for a SaaS startup?

SaaS startups need to have a VC that understands the SaaS model, including market development strategies, upsell dynamics, sales incentive plan, etc. They also need VCs capable of financing their entire life cycle — on average, SaaS startups raise between $80 and $100 million before an IPO. Lastly, SaaS startups can only thrive if they become leaders in the US. As a consequence, they need a VC that has a strong international network and can help them develop their go to market successfully in the US.

What investment trends do I foresee for 2020 in the SaaS industry?

More and more champions will be built out of Europe.

The SaaS infrastructure will become increasingly more driven by APIs: developers will use more API driven services like Algolia or Segment to reduce time to market and focus their dev resources on the part of their product which differentiate them.

Mobile will drive new use cases.

Do you consider yourself as competing with US VCs for SaaS startups?

We are a global VC, therefore we’re competing — and at the same time partnering! — with VCs everywhere in the world.

Friday, December 11, 2015

Mastering
your pitch to a VC, prospective customers, new hires or partners is part art
and part science. As a VC, I hear dozens of these every week, and what I’ve
learned is that a masterful and successful pitch for a SaaS company involves 10
key items.

The
best entrepreneurs are often those who can articulate their vision and roadmap
in a simple, elegant and purposeful manner. I have tried to analyze the
elements which get me excited about a company – drawing from what I observed
from CEOS of start-ups I have backed, like Nicolas Dessaigne (Algolia), Frederic
Mazzella (BlaBlaCar), Stan Niox-Chateau (Doctolib), Graham Cooke (Qubit) or Jonathan
Benhamou (PeopleDoc). This post is a summary of my findings, with a lens
focused on SaaS businesses.

I highlighted five pieces of advice in part-one
of this two-part post as illustrated in five words: Alignment, Preparation,
Advice, Backdoor and ‘Wow’. Here are the final five pieces of advice. Hopefully
this will help you pitch your SaaS company with greater impact.

#6 Passion

While everyone wants to make
money, good VCs look for more in an entrepreneur than the desire to cash out.
They invest in entrepreneurs who want to change the world. When Elon Musk
received $200 million from the proceeds of the PayPal acquisition in 2002, he
re-invested everything to build the next big thing: $100 million in SpaceX and
$100 million in Tesla. Talk about passion and commitment!

Don’t hold back your passion and your
vision – give examples of crazy flights and nights in the office to meet a
launch date, or epic stories with your first customers. Illustrate how you have
pushed the limits of what’s possible.

#7 Story

Smart VCs fund entrepreneurs if
they believe in their story. When you prepare slides, think about the narrative
– it should be told as a personal story. A touch of humor also helps.
Illustrating your points with personal stories help people relate and remember
your message. For example, I have always remembered how Frederic came up with
the idea of BlaBlacar:

“It all started one Christmas, when Frédéric wanted to get home to his
family in the French countryside. He had no car. The trains were full. The
roads, too, were full of people driving home, alone in their car. It occurred
to him that he should try and find one of the drivers going his way and offer
to share petrol costs in exchange for use of an empty seat. He thought he could
do it online, but no such site existed.” (You can read the full
story here)

#8 Engine

Developing a scalable sales and
marketing engine is a key element of success for SaaS companies. It’s very
important to explain in detail how this engine is designed and how you can
scale while maintaining quality and productivity. Here are a few typical models
and some of the points I would find interesting to highlight:

Enterprise sales (e.g., Docusign, Peopledoc): typical outbound sales model targeting
mid market+ companies and relying on being able to hire consistently sales
people making their quota. I like to understand for these models how many sales
people are quota carrying, what is the distribution of quota attainment, and
what is the profile of an ideal sales person

Inbound model (e.g., Algolia, Twilio, Sendgrid): for companies targeting
developers for example, the outbound model is harder to develop as developers
rarely answer sales call. This model relies on grass root marketing of the
targeted community, combined with smart online tactics (e.g., content
development) to generate inbound interest. For this type of model, I would like
to understand how the number of inbounds is scaling with the activities and how
much virality there is in the model as the word spreads out in the community

SMB door to door sales (e.g., Doctolib, OpenTable): this
model is the little parent of the enterprise sales model but for SMBs.
Typically, it is a combination of an inside sales engine generating leads and
booking appointments for an outbound door to door sales team. These teams are
typically run on monthly quotas. For this model, I like to understand how
scalable the lead gen model is (e.g., how many searches are available on
Adwords) and what is the quota attainment and churn rate of the sales people as
well as their profile

SMB online sales (e.g., Wix): for SMB product sold
mostly online, the key for me is to understand the scalability on Adwords as
well as the channel strategy

Entrepreneurs must concisely explain
their own model and describe how the engine will churn out powerful results
month-after-month and year-after-year. You might not add all of this in the
slides, but be prepared to explain how your engine will scale, where your teams
be located and how they will be structured for growth.

#9 Numbers

There’s a saying that “numbers raise dollars.” In other words,
there are universal metrics that smart investors require to make investing
decisions. I outlined five of these financial KPIs for SaaS, which I called the
5 C’s
of SaaS Finance:
Customer Monthly Recurring Revenue (CMRR); Customer Acquisition Cost (CAC); Churn;
Customer Lifetime Value (CLTV); and Cash.

However, with the evolution of
new SaaS models, I added three more that will likely pertain to your sales
engine:

Cohorts: when most SaaS
models were targeting mid-market or enterprise customers, there was not a lot
of volatility in the churn and upsells, so looking at the average was
meaningful enough. Today, we are seeing more an mode model where the churn can
be high but the upsells are also very high and looking at cohorts help see how
they net out over time

Concentration: I see more and more
companies being built on the back of one or a few very large contract.
Understanding the breakdown of the revenues by customer is something I like to
see upfront in the discussion

Country breakdown: with the development
of the SaaS ecosystem, it is now more common, in particular for services
targeting SMBs to see early stage SaaS companies with customers on all
continents and it says a lot about the scalability of the model. For more
traditional enterprise SaaS companies starting in Europe, showing traction in
the US and outside of their home country is also very important.

#10 Listen

A pitch is also an opportunity to
get to know the VC, so prepare questions and take this opportunity to assess
what kind of value the investor will provide. This is essential in determining whether
or not you would like to work with him/her for the next five-seven years. When
I ask entrepreneurs if they want an overview of Accel, I often get the answer “we know, we looked at the website.”

How would you feel if a VC were
to tell you: “I know all about your
start-up because I looked t your website!” You get the idea.

Bonus: European
founders should spend a week in San Francisco. Why? Because telling European
VCs that you are going to the US will add a bit of competitive dynamics to your
fundraising process. They will assume you’ll meet Silicon Valley-based VCs (even
if it is not the case!), which will likely help advance and deepen your
conversations locally.

*****************

Allow
your passion to be at the foundation of your approach – from there, create a
masterful pitch and build a trusted relationship with investors. Remember, it’s
not always about immediate results, but rather about your vision, ambition and
a deep knowledge of the industry you hope to disrupt. Adapt and make it personal
– show us something we’ve never seen before!

About me

French native, I have been working in the technology industry for more than 15 years, both in Europe and Silicon Valley. I started my career in 1998 advising large tech companies with McKinsey&Co, before moving into venture capital in 2006. Some of my past investments include CornerstoneOnDemand(Nasdaq: CSOD), Eloqua (Nasdaq: ELOQ, acq. by Oracle),Criteo (Nasdaq: CRTO), Intacct (Acq. by Sage) and Bizo (Acq. by LinkedIn).

I moved back from Silicon Valley to London in 2011 to Join Accel Partners and focus on investments in Cloud Computing and Online Marketplaces

Beyond technology, I like everything with a board on snow, water or land